How to trade bitcoins with Forex brokers

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Bitcoin is obviously a popular asset to trade, and there are several ways to buy and sell bitcoin. The obvious choice is to go through a bitcoin exchange, but you’re not limited to this. Trading bitcoin through Forex brokers is now possible as long as you find a broker with the service.

Fortunately, a number of them do, allowing you to trade bitcoin. Most brokers will have bitcoin traded against the US dollar as BTC/USD, but Plus500 was the first broker to introduce a bitcoin CFD. Trading bitcoin through Forex brokers has its advantages and disadvantages, some of which include:

Advantages of trading bitcoin through Forex brokers

Here’s why you should consider trading bitcoin through Forex brokers:

Efficiency

Whenever you’re trading an asset, there’s always the concern about how you’re going to check on your trades or place them. Trading bitcoin through Forex brokers eliminates this concern because they will already have trading platforms. It is even more efficient if you do more than bitcoin trading, because then you can do all your trading on one platform. For example, you can trade bitcoin while placing Forex trades simultaneously, which is a very efficient way to invest compared to the alternative.

Leverage

The current value of bitcoin is $1,129 at the Coinbase exchange, and to buy you would have to pay the full amount for a single bitcoin. When trading bitcoin through Forex brokers, though, you enjoy the same leverage offered when trading the Forex market. With leverage, you only need to put down a small portion of the whole value of the trade and you won’t require the entire amount as actual bitcoin trading. Therefore, you can trade more bitcoins through Forex brokers than through a bitcoin exchange.

Certain Forex brokers like Plus500 even offer bitcoin CFDs, which only track the performance of bitcoin. As such, these CFDs require an even lesser deposit, allowing traders to trade even more bitcoin and higher leverage to increase their profits even further.

Disadvantages

Despite all the advantages of trading bitcoin through Forex brokers, there are also downsides which would make direct trading through an exchange more favorable.

Increased cost of trading

The brokers who offer bitcoin trading, or bitcoin CFDs as it may be with Plus500, will have to deduct some charges, either as a spread or commission. In the case of Plus500, they impose a spread on all tradable instruments without charging an extra commission.

Spreads on Forex pairs, especially the major pairs, are usually very low, but bitcoin and other CFDs will be slightly higher. There are also other charges such as those for holding trades overnight. All these build up over time making trading bitcoin through Forex brokers costlier, although only by a small margin.

Absence of a choice of bitcoin exchange

When you’re trading bitcoin directly, you can choose which exchange you would like to use for the trade. There are hundreds of bitcoin exchanges around the world, and their values of bitcoin will be slightly different from one another. This slight difference can affect your profits if you’re trading bitcoin as a speculator. With a Forex broker offering bitcoin trading, you would have to accept the exchange they use. It would strip you of a choice, and you may have to settle for less than favorable quotes.

By Martin

Martin is a professional trader with 3 years of working experience in a Cyprus based brokerage. After the experience, he moved to the UK where he became a financial news reporter at a local news outlet. His years of experience of trading helps him deliver the most quality news, while also analyzing the impacts of it on various markets.